Sprint Investors Get a Small Break

Published Tue, Oct 16th, 2012   Wall Street Daily Research

 

Japanese telecom, Softbank (Tokyo: 9984), has agreed to purchase a 70% stake in Sprint (NYSE: S) for $21.1 billion.

It’s the most money a Japanese company has ever spent on an overseas acquisition, and Softbank believes that the move will give it a valuable entry into the U.S. mobile market.

Softbank investors’ feelings on the idea were mixed, however. Shares tumbled 8% on the news, but are already up over 9% today.

It’s easy to see why some would be nervous about the move. Sprint has lost money every quarter for almost five years – and holds around $15 billion in debt.

The deal is nice for Sprint investors, though, since Softbank is ultimately buying 55% of Sprint’s stock for $7.30 – a 28% premium to the current share price.

As Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York, told Bloomberg, “It’s nice to be able to cash out… Whatever uncertainty was out there about Sprint’s prospects is, for the time being, taken away.”